A legislative project applicable as of January 2024 challenges the tax system in Romania. Its aftershocks seem to be tangible for businesses and individuals. First and foremost, the project targets at micro SRLs (Limited Liability Companies) which have a profitability of more than 30%, and combined with the fact that many of the companies exceed Ron 300,000/year in revenues, they will no longer be qualified as micro-enterprises, but will be taxed with a 16% profit tax instead.
Furthermore, the project states that an individual may have a single company with a MICRO tax system in which to hold shares of more than 25%. On top of it, the self-employed persons shall pay 10% CASS (Social Health Insurance Contribution) applied to the entire taxable income obtained. Thus => self-employed person + income from rents/investments/etc. – an amount is owed to the health insurance fund for the income from self-employed person + another amount to the health insurance fund calculated at the ceilings for the other income. So, the health insurance contribution will be paid twice given you also have self-employed persons and income from other sources.
Dormant micro-enterprises are not exempt from new fiscal challenges. Starting from January 1, 2024, inactive companies will remain micro-enterprises during the period of inactivity. When resuming their activity, given an employee is hired within 30 days, and complies with other conditions, they retain their status as micro-enterprises.
Except targeting micro entities, the new project modifies the profit tax procedure by means of implementing a “tax adjuster” to calculate corporate income tax.
It is a complicated formula, which in practice translates into the fact that if you are a loss, you will still pay about 0.5% profit tax (the calculation depends on several other factors applied to your total income.
Another novelty is that the deductibility is limited to 50% of the value of operating, maintenance and repair expenses related to a registered office located in residential or individual residential buildings. It also decreases from 50% to 25% the deduction for expenses related to motorized road vehicles that are not used exclusively for the purpose of economic activity.
SRL dividends are affected by the new Law too. The dividend tax is changed from 8% to 10%. It is applicable for dividends distributed after January 1, 2023, regardless of which year the dividends belong. At the same time, starting from January 1, 2024, a new ceiling of 36 minimum wages is introduced.
Another point of concern is that a new tax is introduced for the ownership of several real estate properties that together have a value of more than Ron 2.5 million. The property tax shall be equal to 1% and applied to the difference between the sum of the individual taxable amounts and the ceiling of Ron 2.5 million.
Rental income appears to be within the scope of fiscal review. For rental income, a flat rate is reintroduced, and it will be only 20%. It is distinctly mentioned that it is no longer possible to keep simple accounting for rental income, so only a single system will be applied, the one with a flat rate of 20%.
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